City of Spokane v. Washington State Department of Revenue

Summary

The Washington Supreme Court reviewed the apportionment of Spokane's sewerage services between the higher-rate public utility tax for sewerage collection and the lower-rate business and occupation tax for sewage transfer and treatment. The court held that the technical meaning of sewerage collection governs and adopted a substantial-use test, concluding that lateral sewers are collection sewerage while interceptor sewers primarily transfer sewage. The court reversed the Court of Appeals and reinstated the superior court's decision in favor of Spokane.

Holdings

1. The term "collection" is a technical term of art in the sewerage industry and must be interpreted according to its technical meaning rather than an ordinary dictionary definition.
2. Washington's public utility tax applies to the collection function performed by lateral sewers, while interceptor sewers are engaged in transfer and are not collection sewerage merely because an occasional customer connects to them. The court adopted a substantial use test rather than the Department's sole-use or last-connection test.
3. Because the statute and regulation are unambiguous, the court reviews their meaning de novo and need not resolve the competing principles of deference to the agency and construing tax statutes against the taxing power.

Questions Presented

1. How should the term "sewerage collection" in RCW 82.16.020 and WAC 458-20-251 be interpreted for purposes of allocating income between the public utility tax and the lower business and occupation tax?
2. Does sewerage collection continue through an interceptor pipe until the last customer connection, or does collection end when the system's substantial function changes from receiving sewage to transferring it?

Disposition

reversed